Member Info for londoner7

First contact with Baja in Feb

Agreement in July

Discovery in August

Production in September - October

Although I expected oil to be found, for reasons I gave previously, I did wonder how JB would present the news in the first RNS. I think he's done a great job: the drill is complete, oil discovered, decision on production has been taken, completion work is in progress, and initial production of 150 bopd gross expected in 30-60 days - bim bam thank you ma'am!

Assuming a 20% royalty, that's 20 bopd net to Mosman. If I use my net back figure of $36 @ WTI $69, essentially calculated around Welch, I get $22K per month cash positive. I'm inclined to think the net back figure may be higher, say +$10, which would get $28K per month. A very nice return on the $135K total capital invested. Also, this is a useful contribution to my estimate of $65K on monthly operating cash outgoings. Alongside the recent update on Welch, net operating cash flows may turn positive in Sept-Oct.

I believe this was Baja's first development drilling so its success is probably as important to them as it was to Mosman. Baja's 'stock' will have risen, by that I mean their standing amongst potential investors and the relative value of their prospects, but no doubt Mosman will be looking at other development opportunities with them. The $231K earmarked for Arkoma may be heading in a different direction.

Mike, you express a very sensible view in terms of weighting. We are all fighting our inherent system 1 confirmation bias, or to put it another way the tendancy to take greater risk after a loss.

I think MARS at the moment is a company that invites those challenges, but decades of investing has taught me to resist. The fact that MARS is the only company in my portfolio that's in the red also helps. I reached my full weighting in MARS (single stock holding) with my last investment just after the interims in May - I thought the overall response to the 'Beast from the East' was encouraging. Mr Market didn't seem to agree but one must have a limit to averaging down.

If you can manage proper weighting discipline then those stocks in the red should always be your smaller holdings, which helps put them in perspective.

Best, Londoner7

My thoughts:

MARS consists of three segments, which in order of profit are: D&P, taverns and brewery. Taverns and brewery appear to be doing well.

The casual food sector is a tough market, impacted by low consumer confidence, costs, discounting and deliveries. A common reporting metric is like for like (LFL) sales. A business can sacrifice margin, through discounting etc., to chase sales, but it isn't sustainable. A point RF frequently makes in his updates. Margin also matters and on this metric MARS seem do be doing OK considering the cost pressures.

MARS D&P LFL results for 16 weeks to July 21st were down 1.2%. These were adversely affected by the World Cup and poor weather in April. The update said post April overall LFL sales for the last 12 weeks has been 2%. The fact that the update did not explicitly say that D&P had positive growth in this 12 week period suggests to me that the adverse impact of the World Cup outweighed any beneficial impact from the weather.

Numbers from GNK suggest a similar trading performance, so the sector hasn't given the market anything to get excited about, but that is history.

We have now entered a period when LFL comparisions with last year should be easy to beat. The sector's tracker for July, August and September 2017 showed weak to poor performance over the period. MARs have said that 'summer matters', so if the weather improves over the coming days as forecast, and we get a few nice Sundays, then perhaps D&P will pull its weight.

Also weighing on the sector, and MARS in particular, is sector debt. MARS continue to pursue growth through expansion of their D&P estate, including lodges. The result is that net debt has been rising on a yearly basis. Regardless on RF's confidence in this strategy, as an investor I would prefer to see this metric coming down.

However, the update did show the benefit of this recent expansion with total managed and franchised pub sales up 5.2% for the 42 week period. At the 26 week stage it was 3.6% and for last year's full period it was 3.8%. With last year's expansion weighted to the 2nd half of 2017 and a few more decent Sundays this summer MARS might hold a 5 handle on total sales for the full year.

That might turn market sentiment ..... but then there's always the Brexit headwind, so who knows!

Spary1, you said, " Londoner7 looks like your figures were well on the low side, 44 bopd average"

Agreed. This update blindsided me, based on previous updates I felt 30 would be good. There may be an element of flush in these numbers but they may hold 40 over the quarter.There will still be repair cycles, that's part and parcel of owning an old field, but closer to your 40-50 target than mine.

As far as number go I'd put an extra 10 bopd on my figures representing and extra $12K of cash per month. Very useful.

In Feb I said, "which suggests to me 2018H1 margin may struggle to beat 2017H2 but will be up on a year on year basis."

And with the H1 margin at 8.3% versus 8.8% in last year's H2 that's what we got, but 100 bps on margin and good revenue growth in a good combination for profits.

More of the same expected so I guess close to 10% margin for H2 and with Boeing upping their H2 production (see previous comment) it looks good for the full year. Looking forward to the Q&A at 11am.

Rather than dismiss the point scrubbs is making I'd put it in a different way.

A long term investment in Mosman is an investment in John and Andy; their technical expertise and their ability to execute on strategy. Those qualities need to be paid for, and a part of the package is pension contributions.

With respect to strategy and execution I refer you to the chairman's comments from the AGM (cut and paste here to save you the trouble of doing your own research)
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Firstly, Mosman's strategic objective remains to identify opportunities which will provide operating cash flow and have development upside, in conjunction with progressing exploration of existing exploration permits

Secondly, Mosman operates with a small number of employees and consultants. This is designed to minimise unnecessary costs. Given the Company now operates in several countries and in four time zones, it is most important that the Board recognises the efforts of all those people in 2017.

Thirdly, during the year the Company has been successful in reducing corporate costs.

Finally, the objective of becoming a producer has been achieved and Mosman now has interests in three producing projects.
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Job done? Most of the LTHs posting here seem happy, but it appears scrubbs is in the unhappy camp.

Of course the traders here have a very different perspective. They have no interest in John or Andy's abilities. Currently, they are focused on Baja's ability to wet their drill bit – this week, hopefully.

The prospects for LTHs will then rest on JB's ability to convert any news on Stanley into a positive RNS. LTHs are then free to top up, hold or exit,

Finally, I think a key point scrubbs is phrasing for the newbie is, be careful out there!

Mikjjo, SIPP, as has been said, if you are likely to hit the LTA get advise.

One important point, if you have not contributed to your pension since (I think) April 2016 then you can apply for the previous higher level of LTA. Any contribution post this date negates the benefit of the higher LTA. Get advise on this if it applies to you.

However, the rules are not complicated if you understand them and can construct a spreadsheet, it's easy to develop a strategy.

Each time you put funds into drawdown an element of your LTA is used up - roughly speaking if you put £100K into drawdown today you would be using 10% of your LTA.

Anticipating your position at 75 can be tricky, but a spreadsheet helps. The LTA limit impacts me. To minimise the impact my stategy is to conduct phase drawdown prior to 75 and spend it (or transfer to an ISA) before the assessment at 75. Of course you also want to minimise income tax if possible avoiding the higher rate. I withdraw to the higher rate tax allowance every year.

Bottom line if you expect to exceed the LTA at 75, which grows at about 3% pa at the moment then you should be developing a strategy now. With advise if you don't understand the full implications.

TonyinThe Midland, when I saw your post I thought well done I never spotted it, but having reread the RNS THREE times again I still don't see the comment on higher than expected synergies.

Please cut a paste a section from the RNS with the comment.

I wonder when this chat occured?

http://www.cityam.com/289710/marstons-confident-achieving-record-year-world-cup-has

"Findlay said that cost savings from the integration were now expected to be slightly higher than projected."

Seems the sort of update that could have been put into this morning's RNS

Senior down today, it seems, on slightly disappointing news from Boeing, but disappointment with Boeing doesn't seem to be around factors relating to Senior's business.

One number that jumped out of todays update is that Boeing expect to meet their 810 aircraft delivery target for the full year which represents a 14% increase in the 2nd half over the first half. However, I don't know how this mix of product relates to Senior's deliveries to Boeing.

Maybe Monday's interims from Senior will provide some clues.

I agree. The earlier than expected announcement on the Arkoma entension does look like a 'clearing the deck' exercise in anticipartion of the, hoped for, good news on Stanley in the next week or so.

As I said earlier, I expect the drill to find oil. The question is, would Mosman announce that before determining a likely stable flow rate?

How long does it take to establish a meaningful number for the flow rate after drilling completes?

I suspect Mosman are now mulling over how to present any good news for maximum market impact - one stage or two stages.

(I just deleted four paragraphs of what ifs. Let's see how this chapter plays out)

"5% for period"

Correction, 5% for the recent 16 week period.

It was 3.8% for the 42 week period after 2.9% at the 26 week stage.

I'll mark my own card. I said,

"That means 2.9% for the last 16 weeks would produce a flat result for the 42 week period. Still tough to achieve, which is why I'm looking for just over 2.0%, but who knows, perhaps the world cup had a decent beneficial on D&P - Taverns yes but not so sure about D&P.

I'm sticking with my >3.0% expectation on both periods for Taverns which I think will get a boost from the World Cup so could surprise to the upside."

I thought that was a messy update clearly trying to deflect from the poor performance in D&P.

D&P trading LFL in the last 16 weeks was -1.2%, so I missed by some way with my +2%. The update made it very clear that the World Cup had a negative impact on D&P. In my assessment I'd forgotten that the poor weather had extended into April, which may explain why we didn't get the update on current trading with the interim results to end Mar.

A good result in Taverns at 5% for the period, well up on my >3% target. Clearly the World Cup helped here.

No doubt early share trading will be volatile with trader activity and so far I've only seen buy reiterations from brokers, but nothing yet from Berenberg. If there is a downgrade I think it is most likely to come from them.

Overall, I'm encourages by total sales up 5.2%, obviously benefiting from recent expansion, and the comment on margins. "with operating margin only slightly below last year and in line with our expectations."

I like the "only slightly below", which isn't bad considering the cost pressures. It suggest to me that they are maintaining discipline in promotions.

flundra. you ask, "What premium is currently in the price for expectation of a successful arbitration would you say?"

I have no idea. I made, what I think is a simple and legitiment point that there is a premium element which will be lost if the case is unsuccessful. To be honest it may be insignificant in the day to day gyrations of the oil price., but it exists.

IMO.

As to any day trade today. It's pennies - is that really what fills a day.

flundra, suggesting? I didn't pick up any comment or suggestion on a downside following an unsuccessful outcome. They simply state that their valuation excludes the benefit of a successful outcome.

If you don't believe there is already a premium in the price then that is an opinion you're free to hold. I hope that CNE win the case and the question isn't answered.

Spary1, you say, "then go for a nice high monthly corporate cost".

What is the basis for your comment?

This is how I got to US$65K minimum:

From the half year report (Aussie dollars)
Admin 67K
Corporate 406K
Director fees 60K
Employee benefits 48K
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Total A$581K, or US$430, which is US72K per month.

All of these costs are comparable to costs in the previous 12 months, however I've assumed Mosman has to cut back on costs, so I knocked 10% off, and I think that is generous.

Hence my US$65K minimum.

There will also be costs associated with the OZ licencing of US$150K for this year. I haven't included this because I'm assessing Mosman on the basis of it's US cash flows.

volcano, good spot.

The Catcher asset is proving to be a very good one for CNE bringing in around $200m in operating cash per year. Not to be sniffed at. Therefore, it's clear that the price of oil will play a larger part in CNE's share price than has been the case recently. A look at the SP against recent oil price movement validates this opinion. I think the real prize is Senegal.

However, these boards should be open to all news, good and bad, so that we can all make a better informed judgment on the investment case. That's news or analysis of data, not the usual ramp deramp tosh that predominates on many boards.

MO has added useful content to this board, as he does to many boards.

One point on the 177p upside which UBS refer too; it should be obvious to investors here that there is also a premium in the current share price based on expectations for a successful outcome on the India Tax case. If the case is unsuccessful that would be removed. It isn't in the UBS target price but believe me it is in the current share price.

itsagame, good numbers and some good questions.

Of course we won't know how close Stanley gets to the proposed 150, assuming success, but based on the guidance 120 sounds a realistic starting point with anything above a bonus. The RNS didn't spell out the cost of royalties, private and public, but based on Welch and Stawn, I'd use 20%. It is this adjustment that accounts the difference between gross and net in their updates.

On these numbers net production would be (0.165*120*0.8) = 16 bopd

Based on the last half year report I estimate net back for $70 WTI at $37, but I accept that this could be out by as much as +/- $10. Going with my $37 and your upper number of $50, gives an income of between $17,800 and $24,000 per month.

I prefer to translate to a monthly number cash income number as I like to keep the monthly corporate costs in mind which I have as $65K minimum.

With Stanley in production the next step would be to get a reserves valuation report, which opens up the options of selling or onbtaining a loan on the asset. Hedging would go alongside a loan.

The question is, can they get a loan against Stanley as a standalone asset, i.e. divorced from corporate costs?

A sale may be the best option and should be attractive against the anticipated costs of drilling and constructing the well. I suspect any deveopment potential around Stanley would be a payment/drill/repeat exercise. A bit different from the current licence valuations for the Welch and Arkoma fields.

Trent700, if you're marking my card then I'd better use my calculator ;-)

On the D&P figure I just did a bit of rough metal arithmatic on the basis that the the recent trading period is roughly half the interim period, but it's actually a bit more than that so please allow me a revision - Woodsie, my old Maths teacher wouldn't be happy with my initial estimate

((26/42)*-1.8)+((16/42)*2.9) = 0

That means 2.9% for the last 16 weeks would produce a flat result for the 42 week period. Still tough to achieve, which is why I'm looking for just over 2.0%, but who knows, perhaps the world cup had a decent beneficial on D&P - Taverns yes but not so sure about D&P.

I'm sticking with my >3.0% expectation on both periods for Taverns which I think will get a boost from the World Cup so could surprise to the upside.

leas, it's hard to know what goes into the current share price, but weather wise there are still tough comparisons with last summer which started in a similar fashion to this year and although it now seems a long time ago the sector suffered a two bad periods during the winter, which will be in these figures. However, as I've said before the comparisons with last year are easier to beat from here until the end of the financial year in 10 weeks.

Last year I arrived back in the UK in mid July and the weather was very poor for the rest of the summer. Current long term weather forecasts look good.

".I think we will see a higher average production over the next 6 months because we will have far less downtime, that’s the point of the investment"

I agree. You hope that number is between 40-50, my expectation is closer to 30.

I repeat my question, The 3 additional wells are additional to what?

It's cash flows that matter and regardless what might happen on horizontal wells at Welch or the Stanley drill, right now, operationally, Mosman are dependant on existing facilities at Welch and Arkoma for income. We've had the Welch update and an update and decision on Arkoma is due before the end of the month.

The only other source of funds is from the shareholders.

Yes, we can expect lots of news over the coming weeks and we know from this week that news, any news, can spike the share price upwards. Good luck to all traders and LTHs.

I enjoy following the story and examining the entrails, for better or worse. I'd like to think that my comments are helpful to investors, but understand that some prefer the dark. I hope there is good news on many fronts so that the story continues.